Telecom stocks gain after govt clears spectrum trading guidelines; RComm surges around 12%

The Cabinet cleared spectrum trading guidelines on Wednesday under which telecom operators will be able to sell radiowaves to other service providers, a move that will help address the problem of spectrum shortage.

Cheering the announcement, share price of Reliance Communication surged 11.57 per cent to Rs 62.20, followed by Bharti Airtel and Idea Cellular which gained 2.44 per cent and 2.12 per cent at Rs 355.20 and Rs 149.20, respectively, on Wednesday. Sensex closed 1.59 per cent higher at 25,719.58.

Bank of America Merrill Lynch (BofA-ML) believes approval of spectrum trading norms are positive for the industry. In a research report BofA-ML said, “We see possibility of smaller telcos could hand over their spectrum to larger telcos like Bharti Airtel or Idea Cellular in a particular circle and exit the relevant circle; Telco like RComm could liberalise its 800 MHz spectrum and hand it to Jio to use for LTE.” We consider these norms to be positive for the industry as it would facilitate consolidation in absence of any friendly M&A rules.”

As of now only government is allowed to allocate spectrum to telecom firms through auctions.

The move is expected to increase efficient use of radiowaves by enabling telecom operators, who have a low subscriber base or unutilised spectrum lying with them, to trade in radiowaves.

Reliance Communications (RCOM)